Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Mixed Messages on Music Downloads

There's conflicting evidence on music downloads. Is anyone asking the right questions?

If there's anything we Americans like better than getting stuff for free, it's dragging people into court to try to stop it. That's the only lesson from the continuing war in online music downloads. The Recording Industry Association of America (RIAA) has filed another 500 file "sharers," while a recent study concludes that these lawsuits have indeed scared many Internet users away from downloading. Yet, at the same time, online music downloading is on the rise.

No one doubts that this is a high-stakes squabble. The RIAA has taken a thuggish, if morally defensible, stance. On the other side sit millions of Internet users, 23 million in the U.S. alone, who say they download music files. In between are companies like Apple(NASDAQ:AAPL), RealNetworks(NASDAQ:RNWK), Roxio(NASDAQ:ROXI), Loudeye(NASDAQ:LOUD), CNET(NASDAQ:CNET), and Wal-Mart(NYSE:WMT) that are hoping to really cash in.

Can anyone manage to turn the demand into a lucrative business model? Like other nerd trend-watchers, I have no shortage of personal opinions on the problems, but lately it's dawned on me that one of the biggest hurdles in this nascent industry is a lack of good information on the trends. Note: I said lack of good information.

The background noise is substantial, but studies or surveys are often suspect. A trusted source for Internet info, the Pew Internet and American Life Project (PIP), undertakes online surveys of dubious validity. (See, for instance, the latest work that found that a majority of responding musicians didn't think that RIAA lawsuits would help musicians and songwriters.) Even its statistically rigorous April analysis of download trends misses the meat of the matter. The questionnaire doesn't bother to distinguish between illegal file sharing -- think KaZaa -- and authorized downloads.

Perhaps the worst number for the future of online file sales is this. A full 58% of Internet users say they don't care whether or not they're downloading copyrighted material. The details are sketchy, but the main picture is clear: Legitimate online music merchants won't gain much market through morality. They had better offer something else.